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ING's read of the July inflation report was that "the details show a broadening out of price pressures".

  • "Relatively soft" readings in used car prices, apparel and airfares were "the main reason for the downside surprise on the core inflation figure".
  • But they saw "most other components either reporting the same MoM increase as last month or higher. For example, recreation showed a big acceleration (0.6% MoM), medical care posted its fastest increase since February (0.3%) and housing costs posted another 0.4% MoM increase."
  • ING maintains its view that inflation is unlikely to fade quickly, as "the stimulus fuelled economy is booming" with demand outpacing supply capacity.
  • Housing costs are also likely to contribute strongly, being "the story to watch through the second half of this year and could add nearly a full percentage point to annual inflation on their own."
  • This should pave the way for the Fed to hike rates in late 2022, ING thinks.

Source: ING, Macrobond